Kelly McParland: Stephen Harper needs the political courage to end unfair dairy supports

Stephen Harper needs the political courage to end unfair dairy supports

A free trade pact with the European Union is said to be nearing the final stages. The agreement — a long-sought and much anticipated deal that would do a lot to further Prime Minister Stephen Harper’s efforts to reduce Canadian trade dependence on the United States — is “sitting on the Prime Minister’s desk, waiting for him to decide whether the terms are likely to cause him unacceptable political headaches,” reports the National Post’s John Ivison.

The official word on the progress of free trade negotiations between Canada and the European Union is that “no deal is imminent.” Unofficially, trade sources suggest a framework deal is sitting on the Prime Minister’s desk, waiting for him to decide whether the terms are likely to cause him unacceptable political headaches.

We know the deal that would remove 98% of the tariffs that Canadian exporters pay in Europe is close.

Ed Fast, the International Trade minister, previously said he didn’t want to meet with EU Trade Commissioner Karel De Gucht until progress had been made at a political level. Now, his office says the two men will meet later this week.

Mr. De Gucht forced the issue by announcing he was coming to Ottawa this Wednesday, on his way home from Washington, where he is trying to craft the opening of similar talks with the Americans.

One of the chief “political headaches” is the issue of supply management, the outdated protection Ottawa provides to Canada’s chicken and dairy industries. Hefty tariffs protect farmers from competition but also force Canadians to pay much higher prices for milk, yoghurt, ice cream and other high-demand products. The system has remained largely safe from political interference due to fears of upsetting dairy farmers in a number of Quebec ridings, but has become the focus of increasing pressure from countries in which Canada would like to do business. If we want to sell Europe or Asia our cattle or cars, they want to sell us their cheese and butter.

Ivison writes that Mr. Harper is willing to bend on supply management, but as little as possible: perhaps an increase in the amount of cheese Europe can ship to Canada, but without altering the structure of the system. We can only hope he fails, and that EU Trade Commissioner Karel De Gucht, who is due to meet with International Trade Minister Ed Fast this week, will demand more. Supply management is an costly anachronism that needs to go.

While Mr. Harper may fear a backlash in Quebec, he has political cover to take that chance, provided by no less a figure than Martha Hall Findlay, one of the candidates for the Liberal leadership. In calling for an end to supply management, Ms. Hall Findlay notes that there are fewer than 15,000 farms across Canada that benefit from it, compared to 210,000 other farms that directly gain from access to overseas markets. For every well-off dairy farmer protected from the threat of competition, there are almost 15 others who would benefit from greater access to overseas buyers. One of Canada’s goals in the EU talks is to increase exports of beef and pork to the EU, a bloc of 27 states with 500 million people.

Since supply management was introduced in 1971 the number of Canadian dairy farms has dropped by 91 per cent

Sacrificing that opportunity for the sake of a few ridings in Quebec never made sense, and makes even less now, especially for a government that has put trade expansion at the centre of its agenda. While there may be some political risk, Ms. Hall Findlay suggests the danger is less than is often portrayed. Since supply management was introduced in 1971, she writes, the number of Canadian dairy farms has dropped by 91 per cent, meaning “there are few, if any, ridings where dairy votes could plausibly swing elections,” especially compared to the number of ridings where farmers would benefit from an end to the system.

If the support of a Liberal leadership candidate isn’t enough of a shield for the Conservatives, there is also the matter of the Trans-Pacific Partnership, a group seeking expanded free trade among Pacific Rim nations, and which Canada is eager to join. The TPP is even bigger than the EU — 11 countries with a combined population of 658 million. Canada has been invited to participate in talks, but other members are wary of its protection for dairy producers: both Australia and New Zealand — both of which successfully dismantled similar systems — have opposed granting full membership as long Canada refuses to do so as well. U.S. dairy and poultry producers have also been lobbying Washington to demand greater access to Canada.

Studies show that the higher prices caused by supply management are most damaging to the lowest-income Canadians, who are forced to spend a higher percentage of their wages on milk, eggs or other essential products. Ending the tariffs would thus be of benefit not just to those producers who would have new access to millions of customers, but to Canadian families that would have to devote less of their family budget to basic foodstuffs.

Ms. Hall Findlay notes that it would require political courage to end the system, but she may be overstating the case. Support for tariffs is limited to a relative few; the benefits would be felt by Canadians across the country. Mr. Harper has the opportunity and the ability to put an end to the system, and should seize on it. Should he balk, we’ll be cheering for the EU and other free traders to hold his feet to the fire.